Market Wrap

Saturday, May 22, 2010

The Westpac-Melbourne Institute’s Consumer Sentiment Index was released this week and it showed a fall in consumer confidence of -7.0% during May 2010. The Index now sits at 108.0 points suggesting that consumers have become less confident in domestic economic conditions over the last month. This is likely to be the result of a volatile share market, economic instability in Europe and higher interest rates. Whilst this month’s result is the weakest since June 2009, the Index remains well above 100 points which is the point where optimists and pessimists are evenly balanced. A subset of the Index, the ‘Time to Buy a Dwelling Index’ recorded a fall of -15.4% from 104.3 points last month to 88.2 points indicating that a majority of people surveyed believe the optimal time to purchase a home may have passed following the strong capital gains in home values over the last year and interest rate hikes.



The Reserve Bank’s Head of Financial Stability, Luci Ellis, gave a very interesting speech this week at the Australian Financial Review’s Residential Property Conference. The speech is available here. Luci’s final comments summed the presentation quite succinctly: “Housing prices have been under upward pressure in Australia. It would be helpful if more of that demand could be accommodated with extra homes for occupation, instead of by higher prices. Every cycle starts with something real, something fundamental. Recent data suggest that we do not have a credit-fuelled speculative boom on our hands. It would not be desirable for the current situation to turn into one.”



The rpdata.com Market Activity Index has once again trended upwards over the last week as real estate professionals remain active with pre-listings activity. The consistently high index values are reflected in the number of new listings flowing into the market week on week which have been above the twelve month average since February and higher than the same period last year for every week so far this year.

- RPDATA

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